Treasuries Trade in Narrowest Range Since 2007 on Ukraine, Data

March 1 (Bloomberg) -- The 10-year Treasury note traded
within the narrowest monthly range since April 2007 as unrest in
Ukraine and debate about weather-affected economic data
dissuaded investors from pushing yields higher.

Benchmark yields fell to a three-month low as reports
showed job growth, retail sales and housing starts were all
lower than forecast amid bets winter weather affected data as
another storm was set to pound the U.S. Investors sought safety
in Treasuries as Ukraine’s acting president accused Russia of
invading Crimea. The U.S. is forecast to add fewer a jobs in
February than the 2013 monthly average when the Labor Department
releases the data March 7.

“We just keep marking time because there isn’t any clear
information about where the game, as far as the economy goes, is
going to be,” said Tom Tucci, managing director and head of
Treasury trading in New York at CIBC World Markets Corp. “When
the weather does break, you’re going to see an awful big and
awful quick snapback.”

Benchmark 10-year yields were little changed at 2.65
percent last month in New York, Bloomberg Bond Trader data show.
The yield fell as low as 2.568 percent on Feb. 3, the least
since Nov. 1, and traded as high as 2.784 percent on Feb. 12.

The 10-year note traded within a 21.8 basis point range
throughout February, the smallest range since April 2007, when
16.9 basis points separated the high and the low levels for the
security, according to Bloomberg data.

Volatility Drops

Treasury volatility as measured by the Bank of America
Merrill Lynch MOVE index was 58.14, at almost a nine-month low
and down from 73.55 at the end of 2013. It has averaged 71.88
over the past year.

The difference in yields on 10-year notes and inflation-protected debt, known as the break-even rate, widened widened by
0.02 percentage point to 2.18 percentage points, the most since
Feb. 13, after a separate report showed a pickup in consumer
spending even as the economy grew at a slower-than-predicted
pace in the last three months of 2013.

Yields on benchmark 10-year notes touched a three-week low
of 2.63 percent on Feb. 27 as investors sought a haven in the
world’s biggest and most easily traded securities market as the
unrest in the Ukraine worsened.

‘Naked Aggression’

“The Russian Federation started a naked aggression against
our country,” Ukraine Acting President Oleksandr Turchynov said
in a speech broadcast by the parliamentary television channel.
President Barack Obama said at the White House he was “deeply
concerned” by Russia’s military movements.

The Ukraine situation “panicked the market a little bit,”
said Thomas Roth, senior Treasury trader in New York at
Mitsubishi UFJ Securities USA Inc.

The U.S. added 150,000 jobs in February, versus the 2013
average of 193,500, the median forecast of 53 economists in a
Bloomberg News survey showed. That would follow a gain of
113,000 jobs in January, after a revised 75,000 increase in
December, the least since January 2011. Economists in a
Bloomberg survey projected an advance of 180,000 last month.

Data ‘Persistence’

The department said Feb. 19 that housing starts fell 16
percent to an 888,000 annualized rate following December’s
revised 1.05 million. The decrease was the biggest since
February 2011. Economists surveyed by Bloomberg called for
950,000.

“It’s the persistence of the data” that has kept yields
low, said David Ader, head of U.S. government bond strategy at
CRT Capital Group LLC in Stamford, Connecticut.

U.S. gross domestic product grew at a 2.4 percent
annualized rate from October through December, compared with the
3.2 percent gain issued last month, revised figures from the
Commerce Department showed yesterday. The median forecast of 85
economists surveyed by Bloomberg called for a 2.5 percent
increase.

The data also showed that while price pressures remained
muted, they were less subdued than previously estimated. A
measure of inflation, which is tied to consumer spending and
strips out food and energy costs, climbed at a 1.3 percent
annualized pace compared with a 1.1 percent rise prior estimate.
The gauge climbed at a 1.4 percent pace in the third quarter.

Absent the flight to quality, “the gravitational pull
would be to slightly higher yields,” said Michael Materasso,
senior portfolio manager and co-chairman of the fixed-income
policy committee at Franklin Templeton Investments in New York.
The firm oversees more than $320 billion of bonds. “As we move
into the spring, we should see a snapback in economic growth.”